OIG finds funding flaws in Energy's SBIR and STTR grants

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The Energy Department's Small Business Innovation Research and Small Business Technology Transfer grants are fraught with troubles in scoring applicants, potential conflicts of interest and almost $1.4 million in questionable costs, says Energy's office of inspector general.

In a Nov. 6 report (.pdf), the OIG says that Energy needs to get a better handle on how it awards grants and monitors funds once the grant ends.

SBIR and STTR grants focus on developing new technology and innovations for eventual commercialization. Funding from the DOE grew from $116.8 million in fiscal 2006 to $175.5 million in fiscal 2012, and an additional $92 million for Energy-related grants was made available through the American Recovery and Reinvestment Act of 2009.

Auditors say they found $534,000 in erroneous and unsupported company expenses that range from bid and proposal costs to excess labor charges that don't conform to federal cost principles or costs with no receipts. "Reportedly, these errors were caused by clerical mistakes and a lack of knowledge of the cost allowability rules," says the report.

OIG says there were already $840,000 of known erroneous costs Energy had paid out, but says the agency can only resolve them once the grants in question are closed.

OIG expresses concerns over delays in closing out grants, which increase the risk that grantees could not provide records for audit, and notes 78 grants waiting to be closed out had been expired for more than five years – much longer than the 90 day deadline.

Conflicts of interest in the SBIR and STTR programs currently aren't easily identifiable or easy to remedy, says OIG. Not only are those responsible for ranking and awarding grants not required to certify or verify that they are free from such conflicts, but the guidelines for scoring and grant awards are not binding and managers are not required to follow them.

OIG says Energy can make guidelines into firm requirements and address conflicts of interest to ensure applicants are treated fairly. OIG also recommends Energy develop a process for closing grants and collecting required paperwork from grantees.

The report says Energy agrees with some findings and will switch tactics to focus on closing expired grants and will create system to remove potential conflicts from the grant award process.

For more:
- download the OIG report, DOE/IG-0876 (.pdf)

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